Oando gives shareholders opportunity to trade rights issue

Shareholders of Oando plc who may not be able to participate in the ongoing Rights Issue of the company due to liquidity problems have the opportunity to trade their rights on the floor of the Nigerian Stock Exchange (NSE).

Speaking at an investor’s forum, last week, managing director, Oando Group, Wale Tinubu said: “Given the future prospects in the company and the incentives the rights issue price offer, we are confident that all our shareholders will use this opportunity to increase their share holding in the company. But should there be any shareholder who may be prevented by one reason or the other from being able to take up their rights, they can trade the rights on the floor. By doing so they will not be losing out completely”.

The company intends to use the proceeds of the offer to drive its business and expand its operations in the upstream division.

Besides, the managers of the company have embarked on a series of exercises aimed at repositioning it for rapid growth and to further entrench it as a relevant service provider in the energy and gas sectors in Nigeria. Oando plc is currently offering 301,694,876 ordinary shares of 50 kobo each at N70 per share to existing shareholders at a ratio of one new share for every shares already held to raise over N20 billion. The offer opened on January 25 and is expected to close on February 19, 2010.

According to capital market analysts, the offer price of N70 is already offering an instant 24 percent capital gain for investors who take up their rights. Although, investors’ appetite for Oando shares has improved lately, the level of demand for the offer would provide an important indication of the degree of interest that has returned to the capital market and Oando in particular.

However, it is expected that due to liquidity problem, some shareholders may not be able to take up their rights. But speaking at an investors’ forum in Lagos, Tinubu said that existing shareholders who may not be able to exercise their rights will not lose out completely as they can trade their rights on the floor of the NSE.

The chief executive officers of some banks and shareholders had last week pledged their support for the offer. For instance, the group managing director of First Bank of Nigeria plc, Bisi Onasanya, said the offer was desirable, assuring that banks are always there to support Oando’s operations.

‘‘On behalf of First Bank, I endorse the offer, which I think is desirable. The banks are always there and ready to supply you with funds. I want to assure you that banks are still lending and we are never afraid to take risks. We want you to increase your participation in the upstream sector because of the fuel scarcity in the country,” he said. Speaking on behalf of shareholders, the national co-coordinator of Independent Shareholders Association of Nigeria (ISAN), Sunny Nwosu, described the offer price of N70 per share as a good buy.

“We have told our members and friends that the offer is a good buy at N70 and we believe the returns we will get in future will be okay. We will participate in the offer, but the company should not reduce its forecast as stated in the prospectus. We know you can exceed it.”

Tinubu explained that net proceeds of issue amounting to N20.4 billion will be used to partly refinance its aggressive diversification and acquisition strategy the firm had embarked upon in last three years. According to him, the aggressive growth made the company to become highly leveraged, and would therefore need to pay down and restructure some of its loans under better terms.

He added that the company also needed to raise further capital from debt and equity financing sources to develop its new acquisitions in order to diversify its revenue stream.

Oando’s chief executive, identified the company’s diversified business model as a key piece in the future strategy, and revealed plans for it to become the most profitable listed company in the country. “The robustness of our diversified business model, with multiple income streams across the entire energy value chain, will enable us maintain steady profitability and assure investors of guaranteed returns in the short, medium and long term.” he said.